Saturday, September 4, 2010

This Labor Day weekend marks the second anniversary of this blog. From nothing it has grown to 1500-2000 visits per weekday, about double what it was a year ago. It has accumulated almost 1,000,000 pageviews in the past two years, and is now running at 2000-2500 pageviews per weekday. The number of readers may be much higher than is reflected in these statistics, however, since most of my posts are also published on Seeking Alpha, where I'm currently ranked #11 out of 100 authors, with some 40,000 followers. Plus, the blog is ranked #35 out of 461 on Econolog.

I'm still doing the blog ad honorem. One of my original motives for starting the blog was to find a way to give back after so many years of taking, and I'd like to think the blog's growing popularity is a sign that I have something valuable to offer. (Caveat lector: free advice can often be worthless.) I've learned a lot my from supply-side mentors, and this is one way of keeping supply-side theory alive, since it is vastly under-appreciated in my experience. I might still be in the workforce if it weren't for my hearing disability, and the blog provides a great outlet for my passion for economics and markets without the need for commitments or commuting.

My political orientation is libertarian and I am a long-time supporter of the Cato Institute, about whom George Will recently said: "Given freedom, the American people will flower. Given the Cato Institute, the American people will, in time, secure freedom." Like Cato, I will disparage any politician, regardless of party, who promotes policies which I find antithetical to free markets and individual liberty. I think every investor should pay great attention to politics, since good or bad policies can make a huge difference to the economy and the markets.

Finally, my thanks to the many loyal readers and commenters. I'm happy to say that the vast majority of the thousands of comments posted here have been thoughtful and constructive. If there is one thing that I miss in retirement, it is the ability to travel the country and interact with clients that in turn were in charge of managing huge sums of money. I have always learned a lot by having to answer tough questions, and I now receive those almost daily.

31 comments:

Congrats on the blog anniversary Scott, but I have to take issue with one thing you wrote. There is no need on your part to "give back" as you didn't take anything in the first place. In your role in asset management you served as a contributing member of society, helping to make the country more prosperous. I appreciate the sentiment, but there is nothing owed on your part.

Your Blog is a must read for me Scott. Thank you for championing freedom's cause and the free markets that honor human beings. I agree with Colin that you do not need to give back. Giving is it's own reward and you are advocating a good path. Thank you also for using your disability to educate and inspire others.

Very grateful for your work and the approach you take to the site. Hands down my vote for best economics blog on the web.

I came to your site for the first time (almost a couple years ago I guess) b/c Kudlow had referenced an article you had written here on his page. I believe it was an article about the net risk of the CDS market being misrepresented in the mainstream media (grossly exaggerated and misunderstood, that is). I'd have to say that your thesis on that one looks like it was a pretty good one, as the vast majority of them are. I read the CBP as often as I can, the information is succinct, reliable, and always lucidly reasoned.

No doubt many of your readers feel as do that going to your blog is like coming home...a place of blissful respite in a financial world run amok with negativity and dour sentiment. Your relentlessly positive outlook provides a welcome beacon of light guiding our ships safely into the harbor of reason. Congratulations on your anniversary and may you enjoy many more happy global travels!

I do appreciate you sharing your views. This is especially the case given my own bias toward the negative view. I enjoy reading contrary analysis.

However, I must say your early posts in 2008 were very concerning in their consistent discounting of any bad economic news. You called the bottom on a lot of occasions in jobs, manufacuting, GDP growth, housing activity, etc...and there was plenty of downside to come. This was very similar to Wesbury. How would you say your forecasting method has changed in light of this recession?

Congratulations Scott on your blog anniversary. Thank you very much for taking the time to share your insights about the economy with people like me. I have learned a lot in the past two years since I stumbled upon this blog by accident.

I live half a world away, in Indonesia (currently one of the hottest emerging market). Yet every morning, I will log onto your blog. It is a MUST read for me!

Jason and Jen: My optimism in late 2008 proved premature, in a big way. What happened I think was not that my analysis of the fundamentals was wrong, but that I utterly failed to predict how far to the left the Democrats would lurch under the direction of Obama. It think to this day that the drop in the stock market from late 2008 through early March 2009 was almost entirely due to the absolutely shocking fiscal policy which came out of Washington. What it amounted to was a huge, unexpected, massive increase in future tax liabilities.

By late 2008 the market had priced in a severe depression and deflation. Then it had to price in an out-of-control government with many trillions of dollars of deficits, and the higher taxes that would be required to pay for those deficits. It was a "worst-nightmare" scenario. I don't know how to predict those kinds of events. But if you had bought the market then (late 2008) and held on, you would not have been disappointed. That is a key point that I think should be recognized. You can never hope to pick the bottom, and I was mistaken in trying to do so.

While it all remains to be seen, it isn't clear to me that the drop from 1200 to 900 in late '08 was pricing in a severe depression. At 850-900, the S&P was still trading at above average PEs using Shiller's methodology. As you know, the 74 and 82 valuations were half what we saw at that point in late '08.

The fear in early 2009 was likely due to the growing possibility that Obama was not going provide severe regulatory forbearance for the banking system. By March, it decided to do so and the market liked it.

Based on valuations, using more that forward looking estimates, the market could very easily find its way back 850-900. This would not take a severe depression outlook.

In summary, to consider the drop from 1200 in Sept/Oct '08 to 850-900 by late '08 as primarily due to poor policy responses is underestimating what a balance-sheet recession is all about.

This process is long and slow moving and the adjustments for households is done over time through hard decisions and sacrifices that are gut wrenching. Balance sheet realities move like glaciers for households because hope for recovery is so strong.

Scott,Congratulations on the anniversary of the most informative economic blog on the web. Thank you for your diligent work at standing athwart the forces of darkness and saying STOP. Ronald Reagan said "government is the problem" and I say your thoughts on liberty and freedom are the solution.

Jason and Jen: If you look back, you will see I had a number of posts near the end of 2008 and early 2009 that documented my reasons for believing at the time that the market was priced to something worse than the Depression of the 1930s. Corporate credit spreads were one obvious example—at one point they were predicting that almost half the companies in America were going to be bankrupt within the next 3-5 years.

Thank you for doing this. Your blog is a valuable source of information, and I learn a lot about economics through it. I am not an economist, but I studied some economics (only Keynsian economics was taught). I have since converted to the Austrian school, and I agree that it is under appreciated; partly because it simply is not taught in schools so folks are not very familiar with it.

Congrats! Scott I've been fortunate to be with you from almost the beginning. What a ride, huh? I'm a portfolio manager with a major firm and would like to say your research and insight is spot on. Along with my daily java I enjoy reading your blog and Brian Wesbury's weekly comments. For your readers who are interested in Credit Crisis they may enjoy "This Time is Different" by Kenneth Rogoff and Carmen Reinhart. This book offers great insight into how this should all end, and yes it will end and end well. Again thanks for all your hard work and best wishes for you and your lovely family. Lets pray our voters and leaders get it right this time.